Life insurance allows you to protect and provide for your family members after you pass. There are times, however, when someone who holds a life insurance policy no longer needs or wants the coverage. If you find yourself in this situation, you can sell your policy. Before doing so, it’s highly recommended that you weigh the pros and cons to determine if selling your life insurance is the right move.
How a Life Insurance Policy Can Be Sold
If you want to sell your life insurance policy, you can do so via a life settlement, which involves selling the policy directly to a third party. The cash you receive for this policy will likely be much lower than the death benefit that the policy will pay out when you die.
You’ll likely need to hire a broker to help you find a buyer. The buyer will pay you in a lump sum, after which the broker will probably take a cut from the payment. Once the sale occurs, you’ll no longer need to pay the policy premiums.
How Much Cash Is Provided When Selling a Life Insurance Policy?
A few factors determine how much you can get from a life insurance settlement. For one, your age will play a part in how much you receive. In most cases, brokers only work with people who are at least 65 years old.
People who are in poor healthy typically receive a higher sum of money than people in good health. Keep in mind that some brokers only work with policyholders who have a life insurance policy worth at least $100,000. It’s possible to receive anywhere from 10-25% of your policy in cash.
Is it Worth it to Sell Your Life Insurance Policy?
When asking yourself, “Is it worth it to sell my life insurance policy?” the answer is different for everyone. Taking part in a life settlement might be worth it if you no longer need the policy because you don’t have any dependents who are still relying on your income. If you’re finding it difficult to afford the premiums, selling your policy may be a good idea.
However, this solution isn’t right for all policyholders. Many brokers only work with seniors who are likely to die soon so they can receive their payout. If you’re a younger policyholder, selling your policy will likely be difficult. While selling your policy may give you a sizable lump sum payment, this payment will be far lower than your potential death benefit. It’s also common for brokers to charge high fees.
The Bottom Line
Choosing to sell a life insurance policy is always going to be a personal decision. Someone will benefit financially from your death, which is why you should consider all your options before going through with this decision. Before selling your policy, determine why you need the money and if you’ll benefit more from selling the policy than keeping it.